GST Impact on Real Estate Sector (Residential Projects)
The Goal of the article GST Impact on Real Estate Sector (Residential Projects) is to simplified the analysis Proposed in 56th GST Council Meeting related to this sector.The 56th GST Council Meeting held on 3rd September 2025 announced crucial reforms that are set to impact the real estate and construction sector, particularly residential housing.
For residential projects, this becomes even more important because developers don’t get the benefit of Input Tax Credit (ITC). In simple terms, whatever GST they pay on materials like cement becomes a direct cost for the project. So, when the GST rate is reduced, the cost of building homes goes down too—making projects more affordable and boosting demand. Let’s look at this impact more closely. first we see the Key changes which is as below:
1. Key Policy Changes
- Simplified Tax Structure → GST slabs rationalized from 5%, 12%, 18%, and 28% into just two slabs: 5% and 18%.
- Cement GST Cut → Reduced from 28% to 18% (~36% tax burden reduction).
- Marble & Granite → Reduced from 12% to 5%.
- Effective Date → 22nd September 2025.
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2. Impact on Input Costs
- Cement: 28% → 18% (biggest relief for housing sector).
- Marble/Granite Blocks: 12% → 5%.
- Example calculation (Residential Project with cement at 20% of cost):
- Pre-change: Project cost = 100
- Post-change: Project cost = 98.44
- Overall reduction ~1.5%
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3. Sector-Wise Impact
- Residential Housing → Slight cost relief (1–1.5%), improved affordability, especially in middle-income/rural markets. Challenge remains as ITC is not allowed, so benefits may not fully pass to buyers.
- Commercial Real Estate → Stronger impact, as ITC availability plus reduced cement & marble costs boost margins and project viability.
- Infrastructure Projects → Biggest beneficiaries (roads, metros, govt housing) with large-scale cement use and better refund mechanisms
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